Lesson 5: TWS Option Tools & Platform Navigation

Introduction to Trading Platforms

TWS (Trader Workstation) refers to advanced trading platforms used by serious options traders. While specific tools vary by broker, the concepts are universal.

Essential Option Trading Tools

1. Options Chain/Matrix

Purpose: View all available options

Key Features:

• Filter by expiration, strike, volume
• View Greeks for each option
• See implied volatility levels
• One-click order entry

2. Options Analytics

• Probability Calculator: Chance of finishing ITM
• Profit/Loss Calculator: Visualize outcomes
• “What-If” Scenarios: Test different market moves
• Risk Graphs: Visual risk profiles

3. Volatility Analysis Tools

• IV Rank/Percentile: How current IV compares to historical
• Volatility Skew: Differences in IV across strikes
• Term Structure: IV across different expirations

4. Strategy Builders

• Visual Strategy Construction: Drag-and-drop interface
• Multi-leg Order Entry: Simultaneous entry of complex strategies
• Risk Analysis: Immediate P/L and Greeks calculation

Order Types for Options

Basic Order Types:

1. Market Order: Immediate execution at best price
2. Limit Order: Execution at specified price or better
3. Stop Order: Becomes market order when price reached

Advanced Order Types:

1. One-Cancels-Other (OCO): Two orders, if one executes the other cancels
2. Bracket Orders: Entry + profit target + stop loss together
3. Conditional Orders: Execute based on underlying price

Platform Features for Risk Management

1. Position Greeks

• Monitor portfolio delta, gamma, theta, vega
• Set alerts for Greek thresholds
• Real-time Greek exposure

2. Margin Requirements

• Calculate margin for complex strategies
• Real-time margin utilization
• Projected margin for planned trades

3. Scenario Analysis

• Stress test positions
• See impact of market moves
• Calculate worst-case scenarios

Mobile vs. Desktop Platforms

Desktop Platforms (TWS, Thinkorswim, etc.):

• Pros: Full functionality, multiple monitors, advanced tools
• Cons: Steeper learning curve, requires computer

Mobile Apps:

• Pros: Convenience, alerts, simple trades
• Cons: Limited functionality, screen size limitations

Setting Up Your Trading Workspace

Recommended Layout:

1. Monitor 1: Option chain and order entry
2. Monitor 2: Charts and technical analysis
3. Monitor 3: Portfolio and risk management
4. Monitor 4: News and market data

Essential Watchlists:

• Current positions
• Potential trades
• Market indices
• Volatility indicators (VIX)

Automation and Alerts

Setting Effective Alerts:

• Price levels for underlying
• Greek thresholds
• Volume spikes
• News events

Automated Strategies:

• Some platforms offer automated option strategies
• Pre-programmed adjustments
• Systematic trading approaches

Practical Exercise

Using a paper trading account or demo platform:

1. Set up an options chain for a stock you follow
2. Build a multi-leg strategy (like an iron condor)
3. Use the profit/loss calculator to visualize outcomes
4. Set price alerts for key levels
5. Practice entering and adjusting the position